Currency market has been one of the challenging sectors of Iran’s economy from pre-revolutionary period until now. In the following, a brief overview is presented about changing official and free market rates of USD/IRR during last five decades and recent exchange rate plan which has been announced by new head of Iran’s Central Bank.

In 1961-1980, free market rate of USD/IRR and also official rate which has been announced during the last decades by Central Bank of Iran were same and it was 70 Rials. Generally, in last 40 years, revenues derived from oil export were injected to the domestic market and therefore it led to increase in cash supply of greenback to the market and consequently stable USD/IRR rate. In 1980-1988 which Iran Islamic revolution and the Iran-Iraq war had happened, transactions based on dual exchange rate started in Iran’s economy. In this period of time official and free market rates of USD/IRR were 100 and 1,000 Rials respectively. Finally, inefficient policies and attempts to stabilize the currency rate in order to control inflation led to vast rents and corruption in the economy. At the same time as the end of the war in summer of 1988, the average rate of USD/IRR decreased to 960 Rials in the free market. During Rafsanjani’s presidency which started in 1992 and implementing economic adjustment policies, official and free market rates of USD/IRR hit 1,460 and 1,500 Rials. During Khatami’s first presidential period, the mentioned rates experienced 1,750 and 4,780 Rials respectively and in his second presidential term, despite the good macroeconomic situations and international relations, official and free market rates of USD/IRR jumped to 7,960 and 7,990 Rials and as a result, economists’ concerns increased about dual exchange rate. In 2011, nuclear sanctions began against Iran and the mentioned prices soared to 10,960 and 13,570 Rials. Following the start of oil sanctions in 2012, political instability increased and more demands formed in foreign currency market. Finally, official and free market exchange rates grew up sharply to 12,260 and 38,000 Rials in 2012. During the Rouhani’s first presidential period, nuclear agreement and bright outlook of Iran’s economy in one hand and increment of interest rate on deposits on the other hand, led to decreasing demand in currency market and as a result USD/IRR rate fell to 31,800 Rials. In Rouhani’s second presidential term, reduction of interest on deposits besides having a lot of problems in currency trading channels and it led to increase in foreign exchange rates again and they reached to 34,000 and 48,000 Rials respectively. Exiting from JCPOA by the United States and uncontrolled growth of liquidity were the main reasons of USD/IRR to reach 11,7000 Rials in August 2018 as a price ceiling for free market rate of USD/IRR. Following the disturbance in foreign exchange market by speculators, the new head of CBI presented the new currency plan which is included currency pricing based on demand and supply in one hand (except of essential goods, medicine and medical equipment) and elimination of currency market constraints like resuming exchange stores’ activities on the other hand. In this regard, all of the exporters can supply their foreign currencies in the market and based on importers’ demand, the rates of USD/IRR will be determined by demand and supply. Majority of experts believe that the new policy by CBI and following managed float exchange rate system can have a lot of advantages in the long term such as economic stability, business improvement, reducing rents and corruption and capital market boom.

As an example, profitability changes of petrochemical companies after and before liberalization of the exchange rate are shown in the chart below for their financial solar year of 1397:


All in all, as it is shown above, the continuation of the new currency program has more benefits for export-based companies besides its benefits for the macroeconomic stability. as a result, despite the current difficult terms in financial transactions, some industries like petrochemical and metal can be more attractive for investors.